Working long hours as can be tiring, but receiving your paycheck makes all your efforts worthwhile. Unfortunately, a significant portion of your hard-earned money could disappear due to a creditor garnishment. Additionally, you may face constant collection calls from creditors.
Seeking a solution that provides quick relief can help you reset your finances. Bankruptcy can be an effective way to address your debt problems.
What happens when you file?
When you file for bankruptcy, the automatic stay goes into effect. Under the U.S. bankruptcy code, this injunction automatically stops any act to collect or recover money. This means that creditors can no longer legally send payment demands or call you to remind you of your debt.
If a creditor attempts to contact you after receiving notice of your bankruptcy filing, they violate a federal court order. They can face severe penalties for doing so, such as having to pay fines or damages to you.
Can wage garnishment end?
Since wage garnishment is a collection effort by the creditor, it ends due to the automatic stay injunction. You can receive your full paycheck again, providing you with the breathing room necessary to restructure your finances. However, it is essential to notify your employer about your bankruptcy filing, as they may otherwise continue garnishing your wages.
Understanding the nuances of bankruptcy
While bankruptcy stops debt collection calls, the federal law has exceptions where the stay does not apply. For instance, if you have unsettled taxes, you can still receive a notice of tax deficiency or a demand for tax returns. Additionally, the courts can lift or modify the automatic stay if they accept the creditor’s motion for relief from stay.
Before filing for bankruptcy, it is helpful to understand the specific laws involved. A bankruptcy lawyer can offer insights and guidance on the legal process.